Infratil Investor Day | 11 April 2018 - Trustpower
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Infratil Investor Day | 11 April 2018 1. Trustpower presentation to Infratil Investor Day 11 April 2018
Trustpower re-positioning post demerger complete • A New Zealand focused multi-product platform with scale and growth potential • Divestment of GSP Energy Australian Hydro assets adds value and tightens focus • Completion of King Country Energy take over with King Country Electric Power Trust allows consolidation and synergy realisation • Tauranga Energy Consumer Trust debate resolved • We are well positioned in an uncertain world 2. Trustpower presentation to Infratil Investor Day 11 April 2018
Trustpower’s strategy – to create executable options driving
shareholder returns
Bundling Energy and Generation Portfolio Maximising Identifying New
Telco Performance Electricity Value Markets
Strategic Pillars
Shareholder
Value
Driving action based Meeting our Strong, positive Lean, agile, scalable Open culture To deliver
on data, analytics and customers’ needs. relationships technology platforms with a collective a total
Strategic Capabilities
insight. and processes. learning focus. shareholder
return (TSR) in
the top
quartile of the
NZX.
Values
PASSION RESPECT INTEGRITY INNOVATION DELIVERY EMPOWER
3. Trustpower presentation to Infratil Investor Day 11 April 2018
Generation portfolio performance
FY18 Generation volume – drives performance
Generation volume
2,000,000
1,500,000
GWh
1,000,000 Generation volume well above
long run average, however return
to average would out perform
500,000 FY14 – FY16
0
Total NI (Excl KCE) Total SI KCE
5. Trustpower presentation to Infratil Investor Day 11 April 2018
Wholesale price and volume risk management – delivers
sustainable earnings
Well positioned for the start of
Trustpower Controlled Storage winter 2017
200 $400
• Geographically distributed
180 Peter C- original graph from $350
generation
James T I think $300
• Strong generation throughout the
160
$250 year in response to high spot
Storage (GWh)
Price ($/MWh)
prices
140 $200
• Use of hedging instruments to
$150
120 balance portfolio for the 2018
winter limits downside
$100
100
$50 • Lakes have largely recovered,
retaining upside opportunity
80 $-
Total Storage Mean Storage Benmore Daily Average Price
Controlled storage = Cobb, Coleridge and Waipori
6. Trustpower presentation to Infratil Investor Day 11 April 2018
Generation performance focus
• Emphasis on health & safety, dam/civil safety and maintaining our licence to operate and compliance projects
• Sharper focus on enhancement and incremental growth to create earnings uplift
• Improving asset management maturity – more predictive and preventative focus for long term
Matahina Station (In top 5 highest value in portfolio):
• Identified system health & safety and reliability risks
• Fit for purpose solution –‘second hand’ 56MVA
transformer purchased and refurbished
• Improved system availability and reliability
• Reduced health & safety risk
Installed in final location in switchyard
Transformer lifted onto trailer for short journey to switchyard
7. Trustpower presentation to Infratil Investor Day 11 April 2018
Bundling energy and telecommunications
Focus on execution of proven products with increasing
customer acceptance
Current connections
TOTAL CUSTOMERS BY
REGION
Bay of Plenty Metro Regional 273,000 electricity
24%
44% 38,000 gas
32%
88,000 telco
Comment
• 2/3rds of all new customers are taking 2 or more products
• We continue to see strong telecommunications growth
and we are creating a diverse and resilient customer base Over 100,000 customers
• We created a new bundled category and now others are have more than one product
attempting to follow
9. Trustpower presentation to Infratil Investor Day 11 April 2018
Now the leading multiproduct business – differentiates
from competition
BUNDLE CUSTOMERS BY
BUNDLED CUSTOMERS BY TENURE
REGION
Less than 1 Year 1-3 Years
Bay of Plenty Metro Regional
3-5 Years > 5 Years
22%
32% 28% 21%
11%
40%
46%
Focused cross sell and retention in FY18
Targeted acquisition • Over 3,000 existing energy customers added Telco
• Growth coming from the metros creating a more • 1,200 electricity customers added gas
diverse and resilient customer base • 5,600 customers upgraded from DSL to Fibre
• Targeted outbound campaigns are seeing 80% of new
customers taking two or more products
10. Trustpower presentation to Infratil Investor Day 11 April 2018Value based offers outperform discounting
Acquisition incentive costs aligned to cost of discounts or cash
incentives, however value based offers outperform:
• Better sales conversion and lower sales leakage
• Lower churn and lower credit risk
• Higher energy consumption and larger data plans driving higher
margin per customer
11. Trustpower presentation to Infratil Investor Day 11 April 2018Maximising electricity value
Electricity segment – Demonstrates diversity & tenure
Electricity only Consumer Market
• Electricity segment remains highly competitive with
consolidation and failures likely ELECTRICITY CUSTOMER BASE
• Balanced portfolio across Commercial, Industrial, BY REGION
Government and Consumer
• Opportunities in new energy and emerging technology Bay of Plenty Metro Regional
• Cross sell within the Consumer segment is moving
customers out of this category
25%
Commercial and Industrial market 56%
19%
Comment
• Diverse customer base, typical contract term 2-3 years
Comment
• Average tenure over 7 years, supply relationships with some
of New Zealand’s most recognised corporates for over 15 • Electricity only customer base biased away from the
years metros
• Profitable and sustainable circa 1,700GWhrs/pa • Around 60% of customers have 5+ years tenure
13. Trustpower presentation to Infratil Investor Day 11 April 2018Meeting our customer needs
Focus on efficiency, automation and digital solutions • Increase in the numbers of products supplied and associated customer contacts is offset by the migration of customers to non staffed channels, leading to lower staff numbers. • Productivity of our staffed workforce has increased from 1 contact centre employee servicing 2,163 products to now servicing 2,515 products. 15. Trustpower presentation to Infratil Investor Day 11 April 2018
Automation providing customers with choice
• 45.7% of all customer contacts are now
serviced without human intervention
• Chatbot receiving customer satisfaction ratings
on par with an agent
• Trustpower App released with 29,000
interactions to date and achieving high
satisfaction & engagement rates
• Staffed channels are focussed on positively
impacting churn through delivering high quality
service in the moments that matter
16. Trustpower presentation to Infratil Investor Day 11 April 2018Growth and industry overview
Evolution of TECT process
TECT Proposal withdrawn
• The trustees of the Tauranga Energy Consumer Trust ("TECT") announced, following consultation, they will not be proceeding further with their proposal
announced on 25 January 2018
• Under that proposal, the trustees proposed to move all the assets of TECT into a separate charitable trust (and wind up TECT), and to cease payments
of the annual TECT cheque to Trustpower's electricity customers in the Tauranga and Western Bay of Plenty region from 2023 onwards
• The effect of this announcement is that the status quo, and the payment of TECT cheques, will continue
• We do not expect trustees to revisit this proposal
18. Trustpower presentation to Infratil Investor Day 11 April 2018Key regulatory issues
Low emissions economy
• Trustpower supports and is well placed to contribute to the transition to 100% renewable electricity by 2035.
Electricity price review
• The current market structure functions well. The focus should be on barriers for
transition to a low emission economy; and emergence and growth of new technologies.
• The review is also a valuable opportunity to fine-tune industry governance:
In the generation and retail sector, we think the focus should be on promoting competition, and not on ex-post assessments of overall investment
efficiency.
In the lines sector, the focus should be on delivering the lowest possible prices for consumers while delivering a reliable service, fit for the modern
economy.
Regulatory frameworks for telecommunications and gas
• We would like to see similar issues regulated with consistent approvals across the electricity, gas and telecommunications sectors.
• A review of industry self-governance in telecommunications and gas, to accelerate the introduction of pro-consumer (particularly mass market) and pro-
competitive measures. We are particularly interested in access to mobile networks.
19. Trustpower presentation to Infratil Investor Day 11 April 2018Industry consolidation Trustpower is well positioned to capitalise on emerging market opportunities • The joint KCE takeover offer by Trustpower and the King Country Electric Power Trust (KCEPT) was successful. Trustpower and KCEPT are now working together to achieve synergies, primarily through the sale of the KCE retail customers to Trustpower. This sale has been completed and the transfer of customers is underway. • The GSP Energy sale is complete with a sale price of AUD168 million compared to AUD72 million purchase price (including two small wind farms now owned by Tilt Renewables) in 2014. • Following the sale of GSP and the takeover of KCE, Trustpower will be well positioned to participate in further industry consolidation. • Trustpower currently has undrawn committed bank facilities of around $180 million and is towards the bottom of its leverage targets giving options for capital deployment. 20. Trustpower presentation to Infratil Investor Day 11 April 2018
In summary • Trustpower repositioned as a New Zealand focused multi-product platform • Multi-product platform delivering for customers and shareholders • Well positioned in an uncertain and changing world for further convergence with proven integration capability 21. Trustpower presentation to Infratil Investor Day 11 April 2018
Disclaimer While all reasonable care has been taken in the preparation of this presentation, Trustpower Limited and its related entities, directors, officers and employees (collectively "Trustpower") do not accept, and expressly disclaim, any liability whatsoever (including for negligence) for any loss howsoever arising from any use of this presentation or its contents. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or thoroughness of the content of the information. All information included in this presentation is provided as at the date of this presentation. Except as required by law or NZX listing rules, Trustpower is not obliged to update this presentation after its release, even if things change materially. The reader should consult with its own legal, tax, investment or accounting advisers as to the accuracy and application of the information contained herein and should conduct its own due diligence and other enquiries in relation to such information. The information in this presentation has not been independently verified by Trustpower. Some of the information set out in the presentation relates to future matters, that are subject to a number of risks and uncertainties (many of which are beyond the control of Trustpower), which may cause the actual results, performance or achievements of Trustpower or the Trustpower Group to be materially different from the future results set out in the presentation. The inclusion of forward-looking information should not be regarded as a representation or warranty by Trustpower or any other person that those forward-looking statements will be achieved or that the assumptions underlying any forward-looking statements will in fact be correct. This presentation may contain a number of non-GAAP financial measures. Because they are not defined by GAAP or IFRS, they should not be considered in isolation from, or construed as an alternative to, other financial measures determined in accordance with GAAP. Although Trustpower believes they provide useful information in measuring the financial performance of the Trustpower Group, readers are cautioned not to place undue reliance on any non-GAAP financial measures. This presentation is for general information purposes only and does not constitute investment advice or an offer, inducement, invitation or recommendation in respect of Trustpower securities. The reader should note that, in providing this presentation, Trustpower has not considered the objectives, financial position or needs of the reader. The reader should obtain and rely on its own professional advice from its legal, tax, investment, accounting and other professional advisers in respect of the reader’s objectives, financial position or needs 22. Trustpower presentation to Infratil Investor Day 11 April 2018
Thank You
Appendix
Generation volumes
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Long run
average
MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh MWh
Long Term NI
Generation 690,401 780,391 546,024 749,931 614,570 779,535 921,240 724,997 566,207 516,092 626,126 758,366 987,184 712,389
Long Term SI
Generation 832,536 886,856 925,803 818,512 820,116 956,633 1,012,092 947,841 948,379 1,012,905 930,464 988,994 998,371 929,193
Bream Bay - - - - - - 311 994 1,030 666 981 2,249 2,448 1,395
Deep Stream - - - - - - - 18,713 16,790 20,788 18,525 18,293 17,095 18,368
Esk - - - - - - - - 5,118 15,710 11,630 12,674 14,481 13,624
KCE 236,904 195,178 216,041
Total NI 690,401 780,391 546,024 749,931 614,570 779,535 921,551 725,991 572,355 532,468 638,737 1,010,192 1,199,291 943,449
Total SI 832,536 886,856 925,803 818,512 820,116 956,633 1,012,092 966,554 965,169 1,033,694 948,989 1,007,287 1,015,466 947,560
25. Trustpower presentation to Infratil Investor Day 11 April 2018You can also read
